Study: Michigan Business Development Program of Questionable Merit

Research shows decline in jobs in counties where subsidized projects are located

Tuesday, February 20, 2018

MIDLAND – The Michigan Business Development Program has failed to spark job growth in Michigan counties where the state-subsidized projects are located, according to a study released today by the Mackinac Center for Public Policy. The six-year-old program is the successor to the Michigan Economic Growth Authority, the unsuccessful multibillion dollar tax credit program. Primarily run by the Michigan Strategic Fund, the MBDP gives subsidies, loans and other handouts to select businesses if they meet certain criteria.

The analysis of the MBDP was conducted by Michael LaFaive, senior director of the Morey Fiscal Policy Initiative at the Mackinac Center for Public Policy, and Michael Hicks, director of the Center for Business and Economic Research and professor of economics at Ball State University. Using quarterly employment data from the U.S. Census Bureau, the study analyzed the employment impact on counties where companies that received MBDP assistance were located.

The results show that for every $500,000 in subsidies handed out over a period of 10 quarters, county employment fell by about 600 jobs.

“The findings do not surprise us,” said LaFaive. “Much of the academic research, as well as that performed outside of universities, suggests that incentive programs like the MBDP are largely ineffective and unnecessary.”

The data analyzed is not the only indication of the program’s failure. Every third deal it set up through fiscal year 2016 has been or is currently in some form of default or was dismissed altogether.

Michigan lawmakers should take notice: The MBDP appears no more effective than MEGA or the recently shuttered film incentive program. State planners are not effective at picking winners and losers in the marketplace and the publicly available data suggests that there is not an overall positive economic impact from this spending.

The Mackinac Center for Public Policy is a nonprofit research and educational institute that advances the principles of free markets and limited government. Through our research and education programs, we challenge government overreach and advocate for free-market approach to public policy that frees people to realize their potential and dreams.

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